Britain’s awkward embrace of CETA

Eurosceptic MEP David Campbell Bannerman celebrating CETA in the European Parliament 15-16 February 2017

Wariness about its own future in CETA has replaced Theresa May’s government’s initial enthusiastic embrace the EU’s new trade pact with Canada, Iana Dreyer writes.

When the European Parliament ratified the EU-Canada trade agreement CETA, British eurosceptics cheered. But the government has been surprisingly discreet in public on the trade pact with Canada and has toned down its earlier rhetoric positioning the deal as a possible model for future EU-UK trade relations.

After the favourable vote in favour of CETA in Strasbourg on Wednesday 15 February 2017, Emma McClarkin, a British conservative party member of the European Parliament and of its trade committee said: “This is a deal that we can really look to as setting a standard for where we can go in the future with our own trade agreements. This something that maybe we can replicate all around the world to deliver in the new global Britain.”

The eurosceptic East Midlands MEP was not quite as brash in her jubilation as her colleague David Campbell Bannerman, a former member of the UK Independence Party who joined the Tories in late 2016. The right-wing European Conservative and Conservative group’s shadow rapporteur on CETA posted a photo of himself on Twitter with a glass of sparkling wine next to trade commissioner Cecilia Malmström celebrating the Canadian trade deal the evening of the Parliament vote: “Trade Commissioner @MalmstromEU & I toast the passing of CETA. I look forward to toasting UK-EU ‘SuperCanada’ deal!

CETA ‘plus’ is the ideal model of future EU UK trade relations pursued by the likes of Campbell Bannerman. It is the vision of Britain’s die-hard Brexiteers. Radical Brexiteer MEPs in Brussels may pursue lofty ideals at little cost to their career. But Brexiteer politicians in power back in Britain have kept quiet on CETA in recent weeks.

In August 2016 David Davis, Britain’s Secretary of State for Leaving the EU called CETA a “perfect starting point for our discussions with the Commission.” Boris Johnson, Foreign Secretary also said last autumn: “We can be like Canada.”

Official UK policy on CETA was summarised by Liam Fox during a meeting at the House of Commons in November 2016. “By supporting agreements such as CETA we demonstrate to the world that we remain and will remain the strongest global advocates for free markets and free trade”, Fox said. Yet since then the British government has avoided discussing CETA in the open.

Quiet support for CETA

Secretary of State for trade Liam Fox promised last autumn a full House of Commons debate on the agreement. That never materialised.

A hearing was organised hastily in the EU Scrutiny Committee in early February, a few days before the European Parliament’s CETA vote. Greg Hands, Minister of State in charge of trade stood in for Liam Fox.

The meeting was hardly publicised: the session was not filmed, as most committee sessions usually are on the House of Commons website. The committee’s Twitter account did not tweet about the session.

Energies in London are focused on getting the European Union ‘Notification of Withdrawal’ Bill through ahead of the expected triggering of Britain’s departure from the EU in March. Government hopes for an early trade deal, possibly modelled on CETA, with the EU were recently dashed as the 27 insist they want to agree on the terms of the UK’s withdrawal before negotiating a trade pact.

Political realities

Business is now seriously worrying about the prospect of leaving the EU’s customs union. Doing so is the precondition for Britain to engage in future free trade agreements with non EU countries. Now the media are full of alarmist reports about the amount of paperwork and lorry queues at Dover and Calais businesses fret about for their future trade across the Channel. Business associations are obsessing about the ‘rules of origin’ that would apply to the goods in their supply chains with the EU in future. A deal like CETA would entail such complex rules of origin for UK-based traders wishing to export duty free to the EU in future as part of a free trade pact.

On the centre-left the opposition Labour party has become more radicalised. Jeremy Corbyn is against EU trade projects like the now-frozen transatlantic trade pact TTIP. CETA is in the eyes of the left a prelude to TTIP. Corbyn hired John Hilary, a strident anti trade activist and former executive director of the NGO War on Want, as head of trade policy. After the vote on CETA in the EU parliament, Hilary said: “Now the fight will move to the national level. A luta continua”. Labour unions are again combative in the country. In an oped for the Huffington Post Frances O’Grady, the head of the Trade Union Congress qualified the Canadian pact as “a dreadful deal”.

During the House of Commons hearing Hands had to face repeated – and repetitive – questions, from Labour MPs, about the impact of CETA on the United Kingdom’s national health service and on whether the investment dispute settlement provisions included in CETA are a threat to these services.

These left-of centre views are not stopping the government though. In fact, the DIT seems worried about other CETA-related complications.

Renegotiation

During the early February hearing in Westminster, Hands did not mention CETA as a possible model trade deal with the EU at all. The conversation with fellow MPs was about what happens to CETA once Britain leaves the EU, and whether the UK can replicate the agreement with Canada once outside the bloc.

“We do have to bear in mind that, with regard to what transitioning might be done, that is looking fairly far into the future. We are looking to maintain existing commitments, which I think would necessarily be less complex than starting from scratch, in places where such commitments are appropriate”, Hands ventured.

More importantly, the reality is sinking in that CETA would no longer apply should Britain leave the EU. “CETA would no longer apply after we leave”, Hands explained to fellow MPs.

Asked whether there would there be a renegotiation of CETA with Canada, Hands said: “Inevitably, a future UK-Canada free trade agreement … would balance taking what is already there or agreed between Canada and the European Union and seeking to do something specific to the UK. Clearly at some point in the future there will be a balance to strike between continuity and seeking advantages for the UK compared to the previous agreement”, Hands said.

The UK has initiated preliminary talks with other EU free trade agreement partners on the possibility to strike new separate agreements after the UK leaves the EU. Whereas discussions are reportedly advancing with South Korea with which the EU has a successful FTA in place, Canada has so far been prudent in its response to British overtures on such matters, its diplomacy concentrating on seeing through the hitherto complicated CETA adoption and ratification process in the EU. Liam Fox, during a visit to Canada in January, was out to reassure Canadian businessmen: “we have every intention of continuing to honour [CETA’s] clauses as the United Kingdom opens a new chapter in its history”, Fox said. ‘Continuity will be the cornerstone of our future negotiations with the EU”.

CETA is the most wide-ranging bilateral free trade agreement the EU has signed with a third country so far. It eliminates close to 99 percent of border tariffs for goods traded between European countries and Canada, reduces barriers to trade in services, and opens up public procurement markets. The deal also includes a large set of rules ranging from intellectual property to competition to the environment.

Now that CETA has been greenlighted in the European Parliament the bulk of its provisions are expected to come into force provisionally in the spring 2017 until all EU member states have ratified the pact and all its chapters come into force. The latter process could take several years and last longer than the two years foreseen in the EU treaties for the UK to withdraw from the group. The UK timetable for ratification is not yet decided.

Canada UK trade was worth GBP 15 bn (€17.6 bn) in 2015. Services account for around 45 percent of UK exports to Canada. The UK government has estimated that CETA could yield the country annual gains worth GBP 1.3 bn (€1.5 bn).